It was wonderful to see everyone at ALIS in Los Angeles. The conference went off without a hitch, meeting rooms were full, and although the outlook for fundamental performance remained muted, investor sentiment was strong, echoing what we saw in our recently released second annual U.S. Hotels Investor Intentions survey.

Moderating interest rates, a challenging development market, record dry powder, and a narrowing of buyer and seller expectations are hopeful indications that 2025 should see a stronger transaction market. Among the investors surveyed, 94% plan to maintain or increase their hotel investments in 2025, up from 85% last year. This optimism is driven by expectations of better total returns and opportunities in distressed investments. Investors also noted the importance of lowering the federal funds rate to at least 3.75% to boost
investment activity. This is roughly in-line with CBRE’s year-end 2025 target, and details can be found in our free monthly State of the Union report.

Despite a normalization in performance among resort hotels, they remain a favored location type for investment, along with core CBD locations. Investors are particularly interested in higher-priced chain scales and value-add and opportunistic hotel investments. With an eye toward always providing the highest value and freshest thinking, we recently announced we will be launching a revised list of domestic Hotel Horizons® markets and international forecasts later in the year.

RevPAR growth expectations remain modest and achievable, but expense growth remains a headwind. Our forecasts call for most location types to experience RevPAR growth in the 1.5% to 3.5% range on a national basis. Unfortunately, operating and below the line costs are expected to increase faster than RevPAR leading to margin declines and NOI pressures. Unsurprisingly, given the rapid pace of policy changes, investors continue to highlight Labor, insurance, and capital costs remain the primary concerns for investors, although the severity of these challenges has decreased compared to last year.

In 2025, maintaining margins amid slowing growth is crucial. Prioritizing sales and revenue management, cost control, and labor efficiency will be essential to boosting profitability. For those looking for monthly benchmarking assistance, we have just launched monthly Trends® reports, and for those that need up to the minute custom forecasting, feel free to reach out to [email protected]. Whether you are in Miami, Mexico City, Melbourne, Milan or Mantana, we have a local market expert ready to help you navigate the challenges ahead.